Pennsylvania Insurance Commissioner Jessica Altman and Labor & Industry Secretary Jerry Oleksiak announced agreements with two insurers and the Pennsylvania Compensation Rating Bureau (PCRB) to protect Pennsylvania businesses and lessen the chances of errors in the filing of loss costs, which help determine the rates businesses pay for workers’ compensation insurance.
The Pennsylvania Insurance Department on December 13, 2018, approved a mid-year loss cost revision filing from the PCRB, an independent bureau that makes filings to the Insurance Department on behalf of the approximately 350 companies that write workers’ compensation insurance in Pennsylvania.
The mid-year loss cost revision filing was necessary because of an error in a filing submitted by the PCRB which took effect April 1, 2018, that was used to determine workers’ compensation insurance rates for Pennsylvania businesses.
“The error in loss cost filings involved two insurers, Highmark Casualty which subsequently sold its workers’ compensation insurance business to BrickStreet, and resulted in incorrect information being used by the PCRB, resulting in some businesses paying higher rates than they should have,” Altman said in a press release issued by the Insurance Department. The revised loss cost filing approved in December corrected this error beginning January 1, 2019.
“Following an investigation, the Insurance Department determined the incorrect reporting of loss cost data to the PCRB occurred and was approved by the PCRB because of insufficient internal controls at both insurers and the PCRB,” Altman added in the release. “Our department has now taken action, through consent orders with Highmark Casualty, BrickStreet, and the PCRB, to ensure that these companies have sufficient internal controls to lessen the chance of a similar error impacting Pennsylvania businesses’ insurance rates in the future.”
The consent order between the Insurance Department and the PCRB requires that:
- The PCRB must retain an outside auditor approved by the Insurance Department to conduct a full audit of the PCRB’s business practices, including its internal controls;
- The third-party auditor will issue a report on the PCRB’s business practices, including recommendations for changes and improvements;
- The PCRB must adopt the recommendations of the third-party auditor unless any of these is waived by the Insurance Department;
- The Pennsylvania Insurance Department may, within 24 months, conduct an examination, at PCRB expense, to verify the audit report’s recommendations have been adopted by the PCRB.
The consent order with BrickStreet includes the same terms for both auditing and verification contained in the PCRB consent order. BrickStreet is also being fined $80,000 for failing to have sufficient internal controls in the past.
The consent order with Highmark Casualty carries a $145,000 fine for failing to have sufficient internal controls, but since Highmark has sold its workers’ compensation insurance business to BrickStreet and is no longer in this line of business in Pennsylvania, there are no audit or examination requirements in this order.
“I believe these requirements hold these entities accountable for their lack of internal controls in the past and will protect Pennsylvania businesses from being charged workers’ comp insurance premiums based on incorrect data in the future,” Altman said in the release. “Workers’ compensation insurance is vital to protect workers hurt on the job and make sure they get the medical care they need, but this is also a cost for businesses, and that cost must be calculated with accurate information.”
Along with approving the mid-year loss cost revision in December, Altman urged all workers’ compensation insurers doing business in Pennsylvania to take action to reimburse any businesses that were overcharged because of the earlier filing, noting reimbursements amounts would vary based on job classifications.
To date, 90 workers’ compensation insurers writing approximately $660 million in annual premiums have reimbursed their business customers.
“As one of Pennsylvania’s largest workers’ compensation insurers, the State Workers’ Insurance Fund (SWIF) has worked with members of the governor’s administration to ensure that SWIF policyholders are reimbursed for any workers’ compensation insurance overpayments made,” Oleksiak said in the release.
Oleksiak noted that once the SWIF was made aware of the error, it acted promptly to make its Pennsylvania policyholders whole. SWIF retroactively revised and corrected the rates for its policyholders who had been overcharged and informed all of its affected policyholders of the change in premium. These corrected rates accounted for approximately $10 million returned to Pennsylvania businesses.
Source: The Pennsylvania Insurance Department
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